Alternative asset managers are facing new challenges related to tech, talent and demographics, as well as increased competition as their industry converges, finds EY in its 2018 Global Alternative Fund Survey.
“Whether it be competing product offerings, utilization of similar technology or demand for the same talent, hedge funds and private equity funds, as well as other alternative managers, are more frequently stepping on each other’s turf, resulting in the entire alternatives community competing against each other,” the survey says.
Managers and investors surveyed said the greatest risk the industry faces (excluding performance) is investors’ changing needs and preferences. To meet those needs and thus grow assets, managers are diversifying into new offerings such as private credit, real estate and real assets as demand grows for customization.
“Private equity and hedge fund managers alike are finding their investor base is challenging what products fit best within their portfolio and, in many cases, no longer want a one-size-fits-all solution,” says the survey.
It also finds that, regardless of strategy, firms increasingly deploy big data, artificial intelligence and robotics for investment decisions. Further, such tech extends to middle and back offices to improve reporting and data processing—though adoption and application vary among firms.
Finally, as products and tech proliferate, asset managers require new talent, such as data scientists and programmers. And the need for diversity doesn’t stop there.
“Firms also recognize the need for increased gender and cultural diversity to bring fresh perspectives and leadership,” says the survey. “Such changes have resulted in talent profiles being targeted by asset managers that are far different than a generation ago.”
For more details, including how hedge and private equity funds differ in facing these industry challenges, download the full EY survey.
About the EY survey: From July to September 2018, Greenwich Associates conducted interviews with 102 hedge funds representing more than US$1.1 trillion in assets under management, and 103 interviews with private equity firms representing almost US$2.2 trillion in AUM. Greenwich also conducted 65 interviews with institutional investors (funds of funds, pension funds, endowments and foundations) representing more than US$2.7 trillion in AUM.